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Wednesday, July 06, 2011

Down Is Up

SARATOGA SPRINGS, NY, July 6, 2011--Must have something to do with that “lies, damn lies and statistics” Samuel Clemens warned about, but statistics often confuse me. Take Thoroughbred racing economic indicators for the month of June, for instance.

Wagering for the month of June 2011, compared to 2010, was down 5.21%. I figure this is a good thing. Why?

Because the number of race days declined almost double that, at 9.67%. With $887K (rounding up) bet this year on 542 programs, compared to last year’s, when $936K was bet on 600 U.S. race days, this is a good thing, right?

See where am I going with this?

The proportion of loss is lower, so this means the bleeding is slowing, Yes? But here’s the thing that really confuses me. Purses declined by 3.27%, from $100 million in 2010 to $97 million this year.

I understand how purses can decline at a slower rate because with less races carded, there’s more money to be spread around in the races that remain.

But since purses are based on parimutuel handle, how can purses be down 3% when betting is down 5%?

But that wagering decline of 5.21% is good because at this time last year betting was off 7.67%. If the rate of decline is slowing, doesn’t that mean we’re getting closer to the bottom?

And if we’re getting closer to the bottom we will reach the nadir before too very long and then, there’s no place to go but up, betting trends will start to look good again.

Now, actually, if the number of race days continue to shrink, this contraction will result in less bleeding all around, bringing supply more closely in line with demand, right?

Want more good news?

Looking at the whole year, the number of race days have contracted from 2,644 to 2,481, which translates to a decline in racing days of 6.16%. But purses went up. UP! From $447 million year over year to $482 million.

With people betting less money, even if it is less less-money, how is there more money available for all purses?

I should not have cut Economics 101 in favor of the Aqueduct daily double back in the late 60s. (Yes, that was the daily double, accent on daily, as in one opportunity to link one race with the next race).

Which, as an aside, was one opportunity at the time that effectively lower takeout since there is only one rake spread over two races.

Understand? Good, because misery loves company. Why should I be the only one who’s a little confused. OK, maybe more than a little.

So the lesson here seems to be that contraction’s working. If fewer racing dates can result in more purse money, even when handle for the year is down 7.67%, we’re bringing supply more closely in line with demand, correct?

There may be more good news, if memory serves. The rate of decline last year, when compared to 2009, was higher than this year’s 7.67%. If that’s not a decline in the rate of decline, or a slowing down, anyway, that’s another indicator that the bottom is getting closer.

Tuesday, July 05, 2011

State and Industry Cannot Afford Another Wasted Opportunity

SARATOGA SPRINGS, NY, July 4, 2011--With the possible exception of the those who make a living on the Great White Way or Hollywood and Vine, no one does dog and pony shows better than politicians, especially those who reside in the state capitol 35 minutes south of here.

This time I hope that characterization is wrong, because the decision of New York’s State Racing & Wagering Board to create a Racing Fan Advisory Council marks the first time anywhere the game’s bettors and the sport’s fans will get to talk with regulators before policy decisions are made.

Despite the fact that the five-member Council will have no authority to formulate policy decisions, it can make recommendations to insure that players will be heard before any rules and regulations about the game are made.

The Council also can report to the Wagering Board on the day-to-day operations of the tracks and offtrack betting facilities, how those operations affect the fans, and it can even help to develop an I Love New York Racing promotional campaign.

SRWB Chairman John Sabini will appoint three of the five members with one each coming from the Senate and Assembly committee chairpersons. Each member of the Council, to be named during the Saratoga meet, will serve for a period of five years.

While this marks the first time racing fans and players will have to interact with representatives from state government, it’s not the first time horseplayers were asked for their input.

Using the Breeders’ Cup “Fix Six” scandal of 2002 as an impetus, the National Thoroughbred Racing Association created a Players Panel in 2003, a blue ribbon group of some of the game’s most respected horseplayers and industry experts on wagering and business.

Authors Barry Meadow and James Quinn; renown professional horseplayers Paul Cornman, Cary Fotias and Mike Maloney, simulcast expert Ken Kirchner, and noted economist Maury Wolff were a few of the representatives who helped craft the most comprehensive list of recommendations on how the industry can best serve players and fans alike.

There were eight areas of study, including pool integrity, takeout rates, taxes, rebate policies, customer service and uniform medication and drug testing policies. Do any of those issues sound familiar? Has anything really changed?

In all, 44 recommendations were made, some of which contained sub-text with additional suggestions. In February of 2004, the NTRA condensed the list to three areas that it could take to the industry. It was hoped that would be the beginning of meaningful change. It wasn’t.

What the NTRA proposed was that data information and odds changes be cycled every 10-to-15 seconds, that federal withholding on winnings be increased from $5,000 to $25,000, and that seminars on the history and effect of changes in takeout rates be conducted with legislators, track officials and horsemen.

One out of three--getting change in the federal withholding rates--isn’t bad, but it isn‘t very good, either. NTRA also planned to launch a track-based education program, hoping to eliminate the perception that the races could not be beaten. That was 2005.

The lack of progress in improving the plight of horseplayers and fans is not all on the NTRA: Only a handful of tracks even bothered to respond to its recommendations. Maybe it’s because the tracks have no juice in their state houses, or is in business only to please horsemen, or only care about their own job security.

Horseplayers are optimists by nature so there is a chance, however slim, that something good might come of all this. Having the ear of state government whose big league tracks are about to get an infusion of casino cash can make good things happen for the horse industry in New York, and that might help jump-start the industry nationwide.

Here’s some free advice to both sides, asking you to take the very same approach. Go back and study the recommendation of the 2003 Players Panel the industry never gave the intellectual time of day.

Everything that needs to be done, everything, with the exception of promotional suggestions, is contained in that report. Study their recommendations and begin implementing what’s in those pages. There’s no need for further study, it's all been done.

The blueprint for racing's success in the modern era has been in the Players Panel report for eight years now. It took nine years to finally get VLTs on line in New York, so the Council is a year ahead of schedule in that regard.

Not very much has changed for the good and the same problems remain, in New York and everywhere. But New York can be a real leader again, a force for good, but only if it wants to.

Otherwise, the Chairman can announce the names of the five members next month, the state can take no action, before it trots out the dogs and ponies for an encore presentation. The hope is that, this time, it will be different.

Thursday, June 30, 2011

Not Your Father’s Saratoga Press Briefing

SARATOGA SPRINGS, NY, June 29, 2011--I don’t normally feel sorry for executives who earn a half million dollars per year because their health insurance premiums cost $400 a month, especially when they are working at their dream job.

As anyone who works at their hobby already knows, just because you like what you’re doing doesn’t mean it’s not hard work. And when you’re the face of the New York Racing Association, expected to man up every time something goes awry, there’s nothing glamorous or easy about it.

Even before admitting “I made a mistake,” it wasn’t difficult to have empathy for NYRA President Charlie Hayward at the press briefing annually conducted on the last Monday of the month preceding the opening of the Saratoga racing season.

The normally glib Hayward was anything but this week, his tone measured, deliberate. This year’s welcome to the Saratoga racing season wouldn’t be business as usual. Even the usually benevolent local media were fresh out of softballs when the Q and A session began.

Hayward’s opening remarks were upbeat as he noted the positive momentum in NYRA’s recent fiscal fortunes: All sources handle on the Belmont Stakes was up 10 percent, the only Triple Crown track to experience any growth this year.

Then came an announcement that the 15 percent increase in net revenue was attributable to improved business spurred by the closure of New York City OTB.

That, coupled with the advent of its new “off track” facility, the Belmont Café on the grounds of Belmont Park, with projected handle of $75 million would make the facility the largest “OTB” in the state.

And finally how, after acquiring public access Channel 71 in the wake of NYC-OTB’s closure and creating the new “NYRA Television Network,” the volume of its phone business increased nearly 500 percent as 10,000 new accounts were opened while live attendance increased 53%.

But then, in words penned by the author of a New York State of Mind, Billy Joel, a summer in Highland Falls, or Saratoga for that matter, will be always what our situations hand us; either sadness or euphoria.

And so it turned out that NYRA failed to make timely provisions to deal with the increased volume, necessitating a quick fix via a collaboration with TwinSpires.com, Churchill Downs’ advance deposit wagering company in Oregon.

[Correction made July 1]***While the State Racing & Wagering Board eventually and reluctantly gave its approval to the TwinSpires deal, the refusal to divulge proposed salary increases for its top management was part of an inadequate accounting of why the company would lose $11 million this year.

The final straw for the state was Hayward’s failure to show before the Franchise Oversight Board, NYRA’s Chief Counsel and CFO appearing instead. Whether the omission was deliberate or unavoidable, it wasn‘t well received. It wasn’t the kind of tone a new franchisee should set a month before it opens the world’s most visibly successful extended race meet.

And so came the public apology to Robert Megna, Gov. Andrew Cuomo’s Budget Director, and what seemed a gratuitous tip of the cap to the SRWB for allowing orphaned OTB bettors to instantly sign up and fund their new NYRA Rewards accounts, and for permitting the video streaming of all tracks throughout the state. The public mending of fences had begun.

In a letter to the FOB chairman on the Friday prior to the press conference, Hayward disclosed the salaries of its executives and promised to cooperate with the board on a long term financial plan.

Shortly thereafter, Hayward then threw himself on the mercy of the court of public opinion by refusing to reveal the salaries publicly, saying the FOB was free to do so if it wished.

He also invited interested parties to watch a four-hour video of the meeting on the Division of Budget website or read the 41-page report which NYRA’s Media Director would make available; all you had to do was ask.

But then Hayward made some good points of his own, the NYRA President explaining how the association pays the highest parimutuel tax in the country to the state, twice that of runnerup California.

The seminar continued as attendees learned that NYRA’s reconstituted Board of Directors has 11 new members appointed by the state’s political leaders and how that Board approved the unpopular 2010 salary increases by a margin of 24-1 before noting that the same Board unanimously approved the 2011 budget.

Hayward was also correct to indicate that a sizable portion of last year’s $17.2 million operating losses was the result of NYC-OTB going out of business before it could pay the NYRA any of the $28 million it owed the association.

But there wasn’t much sympathy to be gleaned there since the NYRA has itself been forgiven hundreds of millions in state indebtedness at various intervals since its inception in 1955.

Hayward certainly earned his considerable salary on Monday and showed a measure of contriteness in the process. Hopefully, he and his organization has learned something from all this. The two sides will either learn to swim together or sink separately. Good faith is a two-way street.